Once in a lifetime set up for commodities

Feels like the world is boiling right now.

The word TACO is getting thrown around a lot (Trump Always Chickens Out).

But today we have a rare green day — and a bit of a split in the media.

In one camp, you have the cynics, saying everything will still go pear-shaped in the Strait of Hormuz.

Then you’ve got a smaller camp of optimists, who think a resolution is possible.

And then a third camp — the market, which today looks to this as a buying opportunity.

My watchlists are mostly green right now, around midday of ASX trading.

It’s flip of the coin stuff — about as high stakes as it gets.

Yesterday, I started by talking about the potential for a market apocalypse.

And showed how even the much-loved commodities companies on the ASX were getting sold off heavily.

Now for the theory and evidence that I believe make this one of the best environments for commodities investors…perhaps ever.

Assuming you have the nerve to wear some losses in the short-term.

I know that might sound outlandish, but we’re in the business of presenting fat tail events and opportunities that aren’t in the headlines here.

That’s what we do.

Here we go…

Here’s what we know about
the market right now

The ever-astute Michael Howell, of Capital Wars, said global liquidity peaked late last year.

Source: Global Liquidity Indexes

[Click to open in a new window]

That means the money pumps that keep capital moving around the world have started to dry up.

But we know central bankers have plenty of ammo with rates potentially pushing higher, for example, the RBA recently raised rates.

That ammo is hard to use when inflation remains high, and stagflation is a real possibility.

The US Federal Reserve should have a new chair soon — who wants rates down.

Surely…that’s madness!

That’s the reply we hear from most media outlets.

Why would anyone break with established economic orthodoxy and knowingly choose stagflation?

And is this the 1970s all over again?

I think not.

That’s because this is a currency war.

A currency war that centres around resources and technology.

I call it a techno-monetary competitive environment.

Tech meets money, and commodities are at the heart of it all.

We know China is acquiring large amounts of gold, and a commodity-backed digital currency from the BRICS nations has been floated.

But guess who is buying more gold than China recently?

Tether — the company that issues the most widely used stablecoin in crypto markets.

If BRICS has a commodities-backed digital currency, we’ll get more commodities, is the thinking.

Because the West needs its money to be worth something so it can afford the AI data centre build out, where the hyperscalers are issuing corporate bonds on a similar scale to the US Treasury to fund the buildout.

That build out requires immense amounts of other commodities to physically construct the data centres.

And what’s more, commodities are the traditional inflation hedge.

So yes, resource stocks are selling off hard.

But if you have the mettle as a long term-investor, the setup here is about as good as it gets.

Because it’s all about the metal.

Rock on.

Watch my latest presentation on AI and commodities here.